The DCIT, Circle-3(1), Visakhapatnam, Visakhapatnam V. M/s Eastern Power Distribution Company of AP Ltd., Visakhapatnam

ITA 104/VIZ/2012

• Counselvise Citation: 10425314 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-03-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Cost of acquisition; Revised return
• Section: 143(3); 115JB

Judgement Text

ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.74&75/VIZAG/2012 ASSESSMENT YEARS : 2005-06 & 2006-07 M/S. EASTERN POWER DISTRIBUTION COMPANY OF AP LTD. VISAKHAPATNAM VS. ADDL. CIT RANGE-2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAACE 9876B ITA NOS.104&105/VIZAG/2012 ASSESSMENT YEARS : 2005-06 & 2006-07 DCIT CIRCLE-3(1) VISAKHAPATNAM VS. M/S. EASTERN POWER DISTRIBUTION COMPANY OF AP LTD. VISAKHAPATNAM (APPELLANT) (RESPONDENT) ITA NOS.558/VIZAG/2013 ASSESSMENT YEARS : 2009-10 JCIT(OSD) CIRCLE-3(1) VISAKHAPATNAM VS. M/S. EASTERN POWER DISTRIBUTION COMPANY OF AP LTD. VISAKHAPATNAM (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI TH.L. PETER, CIT DATE OF HEARING : 03.03.2014 DATE OF PRONOUNCEMENT : 07.03.2014 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER:- THESE ARE BUNCH OF 5 APPEALS BOTH BY THE DEPARTMEN T AND THE ASSESSEE AGAINST SEPARATE ORDERS OF THE CIT(A) PERT AINING TO THE ASSESSMENT YEARS 2005-06, 2006-07 AND 2009-10. WHILE THERE AR E CROSS APPEALS FOR THE ASSESSMENT YEARS 2005-06 & 2006-07, THE APPEAL FOR THE ASSESSMENT YEAR ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 2 2009-10 IS BY THE DEPARTMENT. SINCE ASSESSEE IS SA ME AND ISSUES ARE COMMON, THE APPEALS ARE CLUBBED TOGETHER AND TAKEN UP FOR DISPOSAL IN THIS COMBINED ORDER. ITA NOS.74 & 75/VIZAG/2012: 2. THE COMMON GROUND RAISED BY THE ASSESSEE IN THE AFORESAID APPEAL READS AS UNDER: 1. APPELLANT SUBMITS THAT THE COMMISSIONER OF INCO ME TAX (APPEALS) IS NOT JUSTIFIED IN REJECTING THE ADDITIONAL GROUND OF APPEAL FILED DURING THE COURSE OF APPELLATE PROCEEDINGS, URGING THAT DIRECT IONS BE ISSUED TO THE ASSESSING OFFICER TO CONSIDER ON MERITS THE CLAIM F OR DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT CLAIMED FOR THE FIRST TIME DURING THE COURSE OF PROCEEDINGS BEFORE THE COMMISSIONER OF INC OME TAX (APPEALS), ON THE GROUND THAT IT IS NOT MAINTAINABL E. 2. APPELLANT SUBMITS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN REJECTING THE ADDITIONAL GROUND RE LYING ON JUDGEMENT OF GOETZE (INDIA) LIMITED V C.I.T. 284 ITR 323(SC), WH ICH IS NOT APPLICABLE TO THE FACTS OF THE APPELLANT, AS THE SAME IS REGARDIN G URGING A DEDUCTION DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER, WHEREAS IN THE APPELLANT'S CASE, THE ISSUE IS, A GROUND OF APPEAL BEING RAISED FOR THE FIRST TIME BEFORE THE COMMISSI ONER OF INCOME TAX (APPEALS). 3. BRIEFLY THE FACTS ARE THE ASSESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF PROCUREMENT, SUPPLY AND DISTRIBUTION OF ELECTRICITY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE RESPECTIVE ASSES SMENT YEARS WITHIN THE DUE DATE. THE ASSESSING OFFICER COMPLETED THE ASSESSME NT U/S 143(3) OF THE INCOME-TAX ACT BY CONSIDERING THE PRIOR PERIOD INCOM E OFFERED BY THE ASSESSEE BUT DID NOT ALLOW THE PRIOR PERIOD EXPENDI TURE BY STATING THAT THE SAID EXPENDITURE RELATED TO THE EARLIER YEARS AND D ID NOT ACCRUE DURING THE YEAR UNDER ASSESSMENT. FOR THE ASSESSMENT YEAR 200 5-06, THE ASSESSING OFFICER ALSO DID NOT ALLOW THE DIFFERENTIAL LOSS AM OUNTING TO RS.48,83,152/- THAT HAS RESULTED DUE TO REVISING THE ORIGINAL RETU RN OF INCOME, STATING THAT THE REVISED RETURN HAS BEEN FILED BEYOND THE TIME L IMIT U/S 139(1) OF THE ACT. ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 3 4. BEING AGGRIEVED OF THE ASSESSMENTS SO MADE, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). IN COURSE OF HEARING OF A PPEAL BEFORE THE CIT(A), THE ASSESSEE RAISED THE FOLLOWING ADDITIONAL GROUND S FOR BOTH THE ASSESSMENT YEARS: 1(A). THE APPELLANT COMPANY RESPECTFULLY SUBMITS TH AT, THE APPELLANT COMPANY IS ELIGIBLE TO CLAIM DEDUCTION U/S 80IA OF THE INCOME TAX ACT FOR THE FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSE SSMENT YEAR 2005-06 AS THE APPELLANT COMPANY HAS UNDERTAKEN SUBSTANTIAL RENOVATION AND MODERNIZATION OF THE EXISTING NETWORK OF TRANSMISSI ON / DISTRIBUTION LINES DURING THE FINANCIAL YEAR 2004-05 AND ACCORDINGLY 1 00% OF ITS PROFITS DERIVED FROM BUSINESS CAN BE CLAIMED AS DEDUCTION F OR TEN CONSECUTIVE ASSESSMENT YEARS I.E. FROM THE ASSESSMENT YEAR 2005 -06 AND UP TO THE ASSESSMENT YEAR 2014-2015. 1(B). THE APPELLANT COMPANY RESPECTFULLY SUBMITS TH AT, THE APPELLANT COMPANY DID NOT CLAIM THE DEDUCTION U/S 80IA OF THE INCOME TAX ACT AS IT HAS INCURRED LOSSES FOR THE ASSESSMENT YEAR 2 005-06 BEING THE FIRST YEAR OF ELIGIBILITY TO CLAIM DEDUCTION U/S 80IA. 1(C). THE APPELLANT COMPANY RESPECTFULLY SUBMITS TH AT, IT HAD INADVERTENTLY OMITTED TO CLAIM DEDUCTION UNDER SECT ION 801A OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2005-06 BEING FIRST YEAR IN THE RETURN OF INCOME FILED BY THE APPELLANT AND ALSO DU RING THE ASSESSMENT PROCEEDINGS COMPLETED AS PER THE PROVISIONS OF SECT ION 143(3) OF THE INCOME TAX ACT. 5. IT WAS CONTENDED BEFORE THE CIT(A) THAT THE ASSE SSEE HAS UNDERTAKEN SUBSTANTIAL RENOVATION AND MODERNIZATION OF EXISTIN G NETWORK OF TRANSMISSION/DISTRIBUTION LINES AND ACCORDINGLY 100 % OF ITS PROFITS DERIVED FROM ITS BUSINESS CAN BE CLAIMED AS DEDUCTION FOR 10 SUC CESSIVE ASSESSMENT YEARS FROM 2005-06 TO ASSESSMENT YEAR 2014-15. IT WAS SU BMITTED THAT THE ASSESSEE DID NOT CLAIM DEDUCTION U/S 80IA OF THE ACT AS IT I NCURRED LOSS FOR ASSESSMENT YEAR 2005-06. IT HAD INADVERTENTLY OMITTED TO CLAIM DEDUCTION IN THE RETURN OF INCOME OR DURING THE ASSESSMENT PROCEEDINGS, HENCE, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER MAY BE DIRECTED TO RECORD THE OPTION EXERCISED FOR REDUCTION U/S 80IA OF THE ACT. ON TH E BASIS OF THE SUBMISSIONS MADE BY THE ASSESSEE, THE CIT(A) CALLED FOR A REMAN D REPORT. IN THE REMAND REPORT, THE ASSESSING OFFICER STATED THAT DEDUCTION U/S 80IA IS NOT AVAILABLE ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 4 UNLESS IT IS CLAIMED IN THE RETURN OF INCOME SUBMIT TED ON OR BEFORE THE DUE DATE U/S 139(1) OF THE ACT. HE FURTHER STATED THAT AS P ER SUB-SECTION (7) OF SECTION 80IA OF THE ACT ASSESSEE SHOULD FURNISH ALONG WITH RETURN OF INCOME AUDIT REPORT IN THE PRESCRIBED FORM, WHICH HAS NOT BEEN DONE BY THE ASSESSEE. IT WAS THEREFORE STATED BY THE ASSESSING OFFICER THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM THE DEDUCTION FOR THE FIRST TIME BEFORE THE APPELLA TE AUTHORITY. THE CIT(A) AFTER PERUSING THE REMAND REPORT OF THE ASSESSING OFFICER DID NOT ENTERTAIN THE CLAIM OF THE ASSESSEE AND REJECTED THE ADDITIONAL GROUND WITH THE FOLLOWING OBSERVATIONS: I HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND REMAND REPORT OF THE AO. THIS A NEW CLAIM WHICH IS MADE FOR THE FIR ST TIME DURING THE APPELLATE PROCEEDINGS. THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 HELD THAT ANY CLAIM HAS TO BE MADE BY FILING REVISED RETURN ONLY. IN VIEW OF THE ABOVE, THE ADDITIONAL GROUNDS RAISED AND CLAIM MADE REGARDING 80IA HELD TO BE NON MAINTAINABLE. THE AD DITIONAL GROUNDS ARE THUS REJECTED. 6. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITY. THE LD. A.R. CONTENDED B EFORE US THAT THE CIT(A) IS WHOLLY UNJUSTIFIED IN NOT ENTERTAINING THE ADDIT IONAL GROUNDS RAISED BY THE ASSESSEE BY RELYING UPON THE DECISION OF THE HONBL E SUPREME COURT IN CASE OF GOETZE INDIA LTD. VS. CIT 284 ITR 323. IT WAS SU BMITTED BY THE LD. A.R. THAT THE RATIO LAID DOWN BY THE HONBLE SUPREME COU RT IN CASE OF GOETZE INDIA LTD. IS THAT ANY CLAIM BEFORE THE ASSESSING OF FICER HAS TO BE MADE BY FILING A REVISED RETURN ONLY. HOWEVER, THAT WILL N OT APPLY TO THE ADDITIONAL GROUNDS RAISED BEFORE THE APPELLATE AUTHORITY. THE LD. A.R. RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF NA TIONAL THERMAL POWER CORPORATION LTD. VS. CIT 229 ITR 383 HELD THAT THE APPELLATE AUTHORITY CAN ENTERTAIN AN ADDITIONAL GROUND IF IT DOES NOT REQUI RE INVESTIGATION INTO FRESH FACTS AND CAN BE DECIDED ON THE BASIS OF MATERIAL A LREADY AVAILABLE ON RECORD. 7. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES , WE ARE OF THE VIEW THAT THE CIT(A) WAS NOT CORRECT IN REJECTING THE AD DITIONAL GROUNDS RAISED BY THE ASSESSEE BY APPLYING THE RATIO LAID DOWN IN GOE TZE INDIA LTD. CASE ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 5 (SUPRA). A CAREFUL READING OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. WOULD MAKE IT CLEAR T HAT IT ONLY APPLIES TO A CLAIM MADE BEFORE THE ASSESSING OFFICER AND NOT BEF ORE THE APPELLATE AUTHORITY. HOWEVER, THE HONBLE SUPREME COURT IN N TPC LTD. VS. CIT(SUPRA) HAS LAID DOWN THE LAW THAT WHEN IT IS A LEGAL ISSUE AN APPELLATE AUTHORITY IS COMPETENT TO ENTERTAIN ADDITIONAL GROUND IF IT DOES NOT REQUIRE INVESTIGATION INTO NEW FACTS AND CAN BE DECIDED ON FACTS AND MATE RIALS AVAILABLE ON RECORD. 8. THEREFORE, FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE APEX COURT AS MENTIONED HEREIN ABOVE, WE REMIT THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE SAME AFTER C ONSIDERING ALL THE FACTS AND MATERIALS ON RECORD AND AFFORDING DUE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. BOTH THE APPEALS OF THE ASSESSEE ARE ALL OWED FOR STATISTICAL PURPOSES. ITA NO.104/VIZAG/2012: 9. THE ONLY ISSUE RAISED IN THE AFORESAID APPEAL RE LATES TO THE CIT(A) DELETING THE ADDITION OF RS.5,21,02,482/- MADE ON A CCOUNT OF PRIOR PERIOD EXPENSES. DURING THE ASSESSMENT YEAR UNDER DISPUTE , THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.2005 DECLARING A LOSS OF RS.9,24,56,078/- UNDER THE NORMAL PROVISIONS AND ADMITTING BOOK PROFIT OF RS.16,71,75,570/- U/S 115JB OF THE ACT. DURING THE SCRUTINY ASSESSMENT P ROCEEDING THE ASSESSING OFFICER WHILE EXAMINING THE SCHEDULE 18 TO THE PROF IT & LOSS ACCOUNT NOTED THAT THE ASSESSEE HAS ADMITTED PRIOR PERIOD INCOME OF RS.74,68,057/-. WHILE DOING SO, THE ASSESSEE HAS ADJUSTED PRIOR PERIOD EX PENSES OF RS.5,21,02,482/-. DETAILS OF WHICH ARE AS UNDER: ASSESSEE CLAIMED THE FOLLOWING PRIOR PERIOD EXPEND ITURE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 6 (I) POWER PURCHASE EXPENSES PERTAINING TO F.Y.2002-03 RELEVANT TO THE A.Y.2003-04 RS.1,79,82,262/- (II) ADVERTISEMENT CHARGES FOR THE F.Y.2003-04 RELEVANT TO THE ASST.YEAR 2004-05 RS.5,01,061/- (III) POWER PURCHASE COST PERTAINING TO 2003-04 RELEVANT TO THE ASST.YEAR 2004-05 RS.89,03,900/- (IV) OTHER PRIOR PERIOD EXPENSES RS.2,47,15,256/- TOTAL RS,5,21,02,482/ - 10. THE ASSESSING OFFICER NOTED THAT ALL THE ABOVE EXPENSES RELATED TO THE EARLIER YEARS BUT NOT ACCRUED DURING THE ASSESSMENT YEAR UNDER DISPUTE. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY T HE PRIOR PERIOD EXPENSES SHOULD NOT BE DISALLOWED AND ADDED BACK TO THE INCO ME. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE INFORMATION REGARDING T HE ABOVE EXPENSES CAME TO THE NOTICE OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IT COULD NOT CLAIM THE EXPENSES IN THE RELEVANT ASS ESSMENT YEAR. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE CONTEN TION OF THE ASSESSEE. HE NOTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING AS PER WHICH EXPENDITURE IS REQUIRED TO BE CLAIMED OR DEBI TED ON ACCRUAL BASIS. THE INCOME/LOSS HAS TO BE COMPUTED EACH YEAR INDEPENDEN TLY. THE RATE OF TAX CHARGEABLE ARE DIFFERENT FROM YEAR TO YEAR. THE NU MBER OF YEARS THE LOSS ALLOWED TO BE CARRIED FORWARD IS ONLY 7 YEARS FROM THE ASSESSMENT YEAR IN WHICH THE LOSS IS CLAIMED/ASSESSED. THEREFORE, BY ALLOWING THE LOSSES OF EARLIER YEARS IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE IS LIKELY TO GET UNDUE BENEFIT FOR CARRY FORWARD OF LOSS BY MORE NUM BER OF YEARS THAN THE MAXIMUM LIMIT. SIMILARLY, EVEN THE INCOME IS POSTP ONED AND THE RATES WILL VARY AND THERE WILL BE SIZEABLE DIFFERENCE IN THE I NCOME TAX. IT WAS FURTHER STATED BY THE ASSESSING OFFICER THAT THE ASSESSEE H AS ALSO NOT MADE ANY PROVISIONS IN THE RELEVANT PREVIOUS YEAR TOWARDS TH E PRIOR PERIOD EXPENSES. THE ASSESSING OFFICER THEREFORE RELYING UPON THE DE CISION OF THE HONBLE DELHI HIGH COURT IN CASE OF DELHI TOURISM DEVELOPMENT COR PORATION LTD. VS. CIT 258 ITR 114 DISALLOWED THE PRIOR PERIOD EXPENSES OF RS.5,21,02,482/- AND ADDED IT TO THE INCOME OF THE ASSESSEE. ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 7 11. BEING AGGRIEVED OF SUCH DISALLOWANCE, THE ASSES SEE PREFERRED APPEAL BEFORE THE CIT(A). 12. IN COURSE OF HEARING BEFORE THE CIT(A), THE ASSE SSEE EXPLAINING THE DETAILS OF EACH OF THE ITEM OF EXPENDITURE RELATING TO THE PRIOR PERIOD SUBMITTED THAT SO FAR AS POWER PURCHASE EXPENSES OF RS.1,79,82,262/- IS CONCERNED, THE ERSTWHILE A.P. STATE ELECTRICITY BOA RD WAS DIVIDED INTO A.P. GENCO AND A.P. TRANSCO IN 1999. A.P. GENCO IS DIVI DED INTO 4 DISCOMS AS PER THE POLICY OF THE STATE GOVERNMENT. ONLY A.P. TRAN SCO IS AUTHORIZED TO PURCHASE POWER AND RESALE THE SAME TO DISCOMS TO UL TIMATELY SELL IT TO THE CONSUMERS. PROVISIONAL BILLING OF POWER IS MADE BY A.P. TRANSCO ON MONTHLY BASIS ON READINGS TAKEN FROM VARIOUS SUBSTATIONS OF TRANSCO. POWER DISTRIBUTION OF VARIOUS DISCOMS IS BASED ON TARGETS FIXED FOR EACH DISCOM. IN CASE ANY DISCOM OVER DRAWS POWER IN EXCESS OF ITS T ARGETS, THE SAME IS ELIGIBLE FOR DISCOUNTS IN RESPECT OF OVER DRAWAL OF POWER. THE ASSESSEE ACCOUNTED FOR A CREDIT OF RS.1.8 CRORES DURING THE YEAR 2003-04 FOR OVER DRAWAL OF POWER. HOWEVER, A.P. TRANSCO HAS REVISE D THE TARGETS OF POWER DRAWAL IN NOVEMBER, 2003. ACCORDING TO WHICH, THER E HAS BEEN NO OVER DRAWAL OF POWER AND THE ASSESSEE COMPANY HAS AGREED TO ADJUST THE CREDIT OF RS.1.8 CRORES AS PER THE MINUTES OF REVIEW MEETI NG DATED 20.11.2004. A FINAL RECONCILIATION OF POWER SUPPLIED BY A.P. TRAN SCO FOR THE YEAR 2002-03 WAS MADE TAKING INTO ACCOUNT THE REVISED TARGETS WH ICH RESULTED IN UNDER BOOKING OF POWER PURCHASE COST BY RS.1,79,82,262/- WHICH WAS COMMUNICATED BY A.P. TRANSCO ON 6.10.2004. ACCORDI NGLY, THE DEBIT AROSE DUE TO THE REVISION OF TARGET AND SUBSEQUENTLY RESU LTING IN REVERSAL OF DISCOUNT ACCOUNTED FOR BY THE ASSESSEE. SINCE THE LIABILITY ACCRUED DURING THE ACCOUNTING YEAR 2004-05, THE SAME IS CLAIMED IN THE SAME FINANCIAL YEAR. SO FAR AS ADVERTISING CHARGES OF RS.5,01,061/- IS CONC ERNED, IT WAS SUBMITTED THAT THIS REPRESENTS ASSESSEES SHARE IN ADVERTISEM ENT CHARGES IN RESPECT OF THE ADVERTISEMENT RELEASED BY A.P. TRANSCO. THOUGH THE ADVERTISEMENTS WERE RELEASED IN MONTH OF JUNE, 2004, A.P. TRANSCO DEBITED THIS AMOUNT VIDE ITS LETTER DATED 6.5.2005 AS THE EXPENDITURE R ELATES TO PREVIOUS YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR UNDER DISPU TE AND ACCORDINGLY, THE ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 8 SAME IS CLAIMED AS PRIOR PERIOD EXPENDITURE IN THE CURRENT ASSESSMENT YEAR. WITH REGARD TO THE FUEL SURCHARGE ADJUSTMENT OF RS. 89,03,900/- IT WAS SUBMITTED THAT A.P. ERC APPROVED RECOVERY OF FUEL S URCHARGE ADJUSTMENT (FSA) FROM ALL CATEGORIES OF CONSUMERS VIDE ITS ORD ER DATED 21.6.2004 AND 2.7.2004. STATE GOVERNMENT VIDE LETTER DATED 5.8.2 004 PERMITTED THE DISCOMS TO RECOVER THE FSA FROM ALL CONSUMERS CONSU MING LESS THAN 50 UNITS PER MONTH. ACCORDINGLY, ASSESSEE PROVIDED LIABILIT Y OF RS.21.50 CRORES FOR FINANCIAL YEAR 2003-04 BASED ON THE AVAILABLE DATA. HOWEVER, A.P. TRANSCO COMMUNICATED ON 5.8.2004 THAT AN AMOUNT OF RS.22.39 CRORES IS PAYABLE AS FSA AND ACCORDINGLY, THE ASSESSEE COMPANY ACCOUNTED FOR THE DIFFERENCE OF RS.89,03,900/- AS PRIOR PERIOD ITEM DURING THE FINA NCIAL YEAR 2004-05. SO FAR AS OPERATING EXPENSES OF RS.2,47,15,256/-, IT WAS S UBMITTED THAT THIS EXPENDITURE CONSTITUTES VARIOUS ITEMS LIKE EMPLOYEE S COST, INTEREST AND FINANCE CHARGES, OTHER EXPENSES, ETC. IN SUPPORT OF SUCH EXPENDITURE CLAIMED, THE ASSESSEE FURNISHED ALL THE DETAILS WIT H NECESSARY EXPLANATION. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF MATERIALS ON RECORD ALLOWED THE CLAIM OF THE ASS ESSEE BY DELETING THE ADDITION. WHILE DOING SO HE RELIED ON A DECISION O F THE ITAT VISAKHAPATNAM BENCH IN CASE OF M/S. HINDUSTAN SHIPYARD LTD. IN IT A NO.21/VIZAG/2006 DATED 10.2.2011. THE FINDING OF THE CIT(A) IN THIS REGAR D IS EXTRACTED HEREUNDER FOR CONVENIENCE. 2.6 I HAVE CONSIDERED ARGUMENTS OF THE ASSESSES. F ROM THE DETAILED EXPLANATION GIVEN BY THE ASSESSEE IT CAN BE SEEN THAT THE EXPEN DITURE COULD NOT BE DEBITED IN THE EARLIER YEARS BECAUSE OF VARIOUS PROBLEMS AND AS EX ACT NATURE AND AMOUNT OF ONLY DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE, ALL THESE EXPENSES BECOME ALLOWABLE DURING THE YEAR UNDER CON SIDERATION AS THE SAME GOT FINALIZED DURING THE YEAR. FURTHER, AO IS ALSO NOT RIGHT IN TAXING THE PRIOR PERIOD INCOME AND DISALLOWING THE-PRIOR PERIOD EXPENDITURE . RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HON'BLE JURISDICTIONA L TRIBUNAL IN THE CASE OF M/S. HINDUSTAN SHIPYARD LTD, VISAKHAPATNAM IN ITA NO.21/ VIZAG/2006 DTD.10.02.2011. THE RELEVANT PORTION OF THE HON'BLE ITAT'S ORDER DT D.10.02.2011 IS REPRODUCED HEREUNDER. 'WE FIND THAT THE ASSESSEE HAS OFFERED THE PRIOR PE RIOD INCOME ALONG WITH THE EXPENDITURE DURING THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER HAS ACCEPTED THE PRIOR PERIOD INCOME IN THI S YEAR BUT DISALLOWED THE PRIOR PERIOD EXPENDITURE. THIS ACTION OF THE AS SESSING OFFICER IS NOT ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 9 PROPER AS HE HAS TO TAKE INTO THE ACCOUNT THE STATU S AS A WHOLE AND NOT TO MAKE A PICK AND CHOOSE. WE HOWEVER, CAREFULLY EXAMI NED THE ORDER OF CIT(A) AND WE FIND THAT CJT(A) HAS ADJUDICATED THE ISSUE IN THE LIGHT OF JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF ADDITIONAL CIT VS. JAY ENGINEERING WORKS LIMITED 113 ITR 389. OUR ATTE NTION WAS ALSO INVITED TO THE OTHER JUDGEMENT OF THE DELHI HIGH CO URT IN THE CASE OF CIT VS. MOBILE PVT. LTD 328ITR 17 ON THE IMPUGNED PROPO SITION OF LAW'. IN VIEW OF THE ABOVE AO IS DIRECTED TO ALLOW THE PR IOR PERIOD EXPENDITURE CLAIMED BY THE ASSESSEE. THIS GROUND IS THUS ALLOWED. 13. THE LD. D.R. THOUGH ACCEPTED THE FACT THAT ISSU E IS SQUARELY COVERED BY THE DECISION OF THE ITAT VISAKHAPATNAM BENCH IN THE CASE OF HINDUSTHAN SHIPYARD LTD. (SUPRA) BUT HE NEVERTHELESS SUBMITTED THAT BOTH THE PRIOR PERIOD INCOME AS WELL AS PRIOR PERIOD EXPENDITURE S HOULD RELATE BACK TO THE RESPECTIVE ASSESSMENT YEAR. 14. THE LD. A.R. ON THE OTHER HAND STRONGLY SUPPORT ING THE ORDER OF THE CIT(A) SUBMITTED THAT SINCE THE EXPENDITURE CRYSTAL IZED ONLY DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDE R DISPUTE IT CANNOT BE DISALLOWED. THE LD. A.R. FURTHER SUBMITTED THAT SI NCE THE DEPARTMENT HAS NOT QUESTIONED THE FINDING OF THE CIT(A) WITH REGARD TO THE CRYSTALISATION OF THE EXPENDITURE, THE GROUND RAISED BY THE DEPARTMENT CA NNOT BE SUSTAINED. 15. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AN D PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF THE RE VENUE APPEALS. AS CAN BE SEEN FROM PARA 2.6 OF HIS ORDER THE CIT(A) HAS GIVE N A CATEGORICAL FINDING THAT ALL THE EXPENDITURE CLAIMED BY THE ASSESSEE CR YSTALIZED DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT Y EAR UNDER DISPUTE. FURTHER, AS CAN BE SEEN FROM THE GROUNDS RAISED BY THE DEPARTMENT, THE DEPARTMENT IS NOT QUESTIONING THE FINDING OF FACT A RRIVED AT BY THE CIT(A) WITH REGARD TO THE CRYSTALISATION OF THE EXPENDITURE DUR ING THE RELEVANT FINANCIAL YEAR. THE ONLY ISSUE RAISED BY THE DEPARTMENT IS T HE DECISION OF THE ITAT HYDERABAD BENCH IN THE CASE OF HINDUSTHAN SHIPYARD LTD. HAS BEEN CHALLENGED BEFORE THE HONBLE HIGH COURT. IN OUR VI EW MERE FILING OF AN APPEAL AGAINST THE DECISION OF THE TRIBUNAL CANNOT BE A GROUND TO NOT FOLLOW ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 10 THE DECISION OF THE TRIBUNAL. THAT APART, THE FACT S ON RECORD CLEARLY SHOW THAT THE EXPENDITURE CLAIMED HAVE CRYSTALIZED DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE. IN THAT VIEW OF THE MATTER WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN AL LOWING THE EXPENDITURE CLAIMED. ACCORDINGLY, WE SUSTAIN THE ORDER OF THE CIT(A) BY DISMISSING THE GROUND RAISED BY THE DEPARTMENT. ITA NO.105/VIZAG/2012: 16. GROUND NO.1 OF THE DEPARTMENTS APPEAL RELATES TO CIT(A) DELETING THE ADDITION MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED THE FOLLOWING ITEMS AS PRIOR PERIOD EXPENSES. I) SHORT PROVISION FOR POWER PURCHASE IN PREVIOUS YEARS (ASST. YEAR 2004-05) - RS.1,36,33 ,551/- II) GUARANTEE COMMISSION - RS.5,19,66,120/- III) H.T. INCENTIVE IN RAJAHMUNDRY CIRCLE - RS. 8,80,234/- 17. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE T O EXPLAIN ON THE ABOVE ITEMS OF EXPENDITURE CLAIMED, THE ASSESSEE IN ITS R EPLY SUBMITTED THAT IN SO FAR AS SHORT PROVISION FOR POWER PURCHASE IS CONCER NED, A.P. TRANSCO HAS RAISED A DEMAND OF RS.1.36 CRORES TOWARDS DIFFERENT IAL COST OF POWER PURCHASED DUE TO RECTIFICATION OF MULTIPLYING FACTO R TO 31.5 MVA POWER TRANSFORMER AT 220KV SUB STATION GAJUWAKA. THE DEF ECT WAS NOTICED AND RECTIFIED DURING THE ASSESSMENT YEAR 2006-07 BY A.P . TRANSCO AND COMMUNICATED TO THE ASSESSEE FOR ACCEPTING THE SAID ADDITIONAL COST OF RS.1.36 CRORES. IT WAS SUBMITTED THAT THE ADDITION AL POWER PURCHASE CAUSED IS NOT DUE TO RATE NEGOTIATION BUT DUE TO A TECHNIC AL PROBLEM WHICH WAS IDENTIFIED SUBSEQUENT TO 31.3.2005. IN SUPPORT OF S UCH CONTENTION, THE ASSESSEE ALSO SUBMITTED THE COMMUNICATION FROM A.P. TRANSCO AND OTHER DOCUMENTS. THE ASSESSING OFFICER DID NOT ACCEPT TH E CONTENTION OF THE ASSESSEE AND ADDED BACK THE SAME TO THE INCOME OF T HE IMPUGNED ASSESSMENT YEAR. SO FAR AS GUARANTEE COMMISSION OF RS.5,19,66,120/- IS CONCERNED, SINCE THE SAME IS NOT AN ISSUE BEFORE US , WE ARE NOT DEALING WITH THAT ASPECT. SO FAR AS INCENTIVE OF RAJAHMUNDRY CI RCLE OF RS.8,80,324/- IS CONCERNED, THE ASSESSEE EXPLAINED THAT THE SAID AMO UNT WAS ADJUSTED AS ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 11 INCENTIVE TO SC NO.348 AND SC NO.335 RAJAHMUNDRY CI RCLE. THE SAID INCENTIVE THOUGH PERTAINING TO EARLIER YEAR IS ADJU STED IN THE CONSUMERS BILL DURING FINANCIAL YEAR 2005-06. AS THE RESPECTIVE C ONSUMERS HAVE CLEARED THEIR OUTSTANDING DUES AND THE LIABILITY ON THE PAR T OF EPDCL TO PAY THE INCENTIVE AS CRYSTALIZED DURING FINANCIAL YEAR 2005 -06 RELEVANT TO ASSESSMENT YEAR UNDER DISPUTE THE SAME IS ALLOWABLE. THE ASSE SSING OFFICER NOTED THAT THE EXPENDITURE WAS PERTAINING TO THE ASSESSMENT YE ARS 2002-03 TO 2004-05. HE FURTHER NOTED THAT THE EXPENDITURE IS NOT DUE TO A CALCULATION MISTAKE COMMITTED IN EARLIER YEAR AND CLAIMED AS A DEDUCTIO N IN THE CURRENT YEAR. THE ASSESSING OFFICER OBSERVED THAT INSPITE OF GIVI NG REPEATED OPPORTUNITIES TO THE ASSESSEE AS IT HAS NOT MADE OUT A CASE THAT THE LIABILITY HAS ARISEN DURING THE YEAR UNDER CONSIDERATION DISALLOWED THE AMOUNT OF RS.8,80,324/-. THE ASSESSEE CHALLENGED THE ADDITIONS BEFORE THE CIT(A) . 18. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE EXPENDITURE SINCE THE LIABILITY CRYSTALIZED DUR ING THE YEAR UNDER CONSIDERATION. SO FAR AS HT INCENTIVE OF RAJAHMUND RY CIRCLE IS CONCERNED, THE CIT(A) NOTED THAT THE INCENTIVE IS PAYABLE TO HT CO NSUMERS ONLY ON PAYMENTS OF DUES WITHIN THE STIPULATED PERIOD. THE INCENTIV E THOUGH PERTAINING TO EARLIER YEAR IS ADJUSTED IN CONSUMER BILLS DURING F INANCIAL YEAR 2005-06 AS THE RESPECTIVE CONSUMERS HAVE CLEARED THEIR OUTSTANDING DUES IN THE CURRENT FINANCIAL YEAR. HE THEREFORE ALLOWED THE CLAIM OF EXPENDITURE. 19. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AN D PERUSED THE ORDERS OF THE ASSESSING OFFICER AS WELL AS CIT(A). AFTER GOING THROUGH THE ORDERS OF THE CIT(A) VIS--VIS THE FACTS AND MATERIALS ON REC ORD, WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF THE CIT(A) IN DELETING THE ADDITION AS THE EXPENDITURE HAS CRYSTALIZED DURING THE FINANCIAL YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE. FROM THE MATERIALS PLACED IN THE PAPER BOOK, IT IS VERY MUCH EVIDENT THAT THE EXPENDITURES CLAIMED HAS CRYSTALIZED DURING THE YEAR UNDER DISPUTE. THE LD. D.R. HAS NO T BEEN ABLE TO CONTROVERT THE AFORESAID FACTUAL FINDING OF THE CIT(A) BY BRIN GING ANY OTHER EVIDENCE BEFORE US. IN THAT VIEW OF THE MATTER, WE ARE NOT I NCLINED TO INTERFERE WITH ITA NOS.74,75,104,105/VIZAG/2012 & 558/VIZAG/2013 M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD ., VSKP 12 THE ORDER OF THE CIT(A) WHICH IS ACCORDINGLY CONFIR MED. GROUNDS RAISED ARE DISMISSED. ITA NO.558/VIZAG/2013: 20. GROUND NO.2 IS SIMILAR TO GROUND NO.1 OF ITA NO .105/VIZAG/2012. THEREFORE, FOLLOWING OUR DECISION IN ITA NO.105/VIZ AG/2012, THIS GROUND OF THE DEPARTMENT IS DISMISSED. 21. IN THE RESULT, WHILE ASSESSEES APPEALS ARE ALLO WED FOR STATISTICAL PURPOSES, DEPARTMENTS APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 7 TH MAR14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 7 TH MARCH, 2014 COPY TO 1 M/S. EASTERN POWER DISTRIBUTION COMPANY OF AP LTD ., P&T COLONY, SEETHAMMADHARA, VISAKHAPATNAM 2 ADDL. CIT RANGE-2, VISAKHAPATNAM 3 DCIT CIRCLE-3(1), VISAKHAPATNAM 4 JCIT(OSD), CIRCLE-3(1), VISAKHAPATNAM 5 THE CIT, VISAKHAPATNAM 6 THE CIT(A), VISAKHAPATNAM 7 THE DR, ITAT, VISAKHAPATNAM. 8 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM